<B>Smurfit Group Sees Strong Second Half</B>

Jefferson Smurfit Group announced first-half profit towards the top end of expectations and predicted sustained recovery through the second half of the year. Smurfit, which has undergone hefty restructuring to cope with overcapacity and weak demand, said pre-tax profit before exceptional items totaled $166.8 million in the six months to June 30 on sales of $2.2 billion.

Gary McGann, Smurfit Group's COO, said the company expected to drive forward its recovery this year and next, helped by more cost cutting, improving sector demand, stable product prices, and falling industry inventories.

Smurfit said the key North American containerboard market was emerging from a typically weak summer period with product prices encouragingly steady. Linerboard prices remained stable at $475/ton during the first half, the company said. McGann said the key U.S. sector was recovering well but was wary of fuelling hopes of an imminent price rise.

"There is a developing element of robustness but it depends very much on the economy. Certainly, no one is jumping up and down about price increases at the moment. I think the industry is having a more sustainable view on prices," he said.

Smurfit's U.S. operations have seen a sharp improvement in their fortunes, helped by extensive restructuring and a string of paper mill closures.

Its 30-percent owned U.S. associate, SSCC, reported first-half pre-tax profit of $154 million on sales of almost $4 billion. SSCC had posted a pre-tax loss of $155 million a year earlier and attributed the turnaround to higher average corrugated product prices.

Earnings had, however, been hit by plant closures -- SSCC has closed six mills since its formation in November 1998 -- and by downtime for maintenance and to let inventories dwindle.

In Europe, demand rose strongly although inventories were up slightly, reflecting what Smurfit called normal seasonal patterns. Growth in containerboard volumes was hit by some mill rationalization and maintenance downtime but prices recovered.

Net sales in Europe rose 15 percent in the first half. Pre-tax profit was up 33 percent. In Latin America, sales rose 32 percent while pre-tax profit was up 42 percent. Mexico, in particular, continued to be helped by strong U.S. economic growth.